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Exceeding VAT threshold

Exceeding VAT threshold

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Hi,

Question regarding VAT threshold. A company has 2 types of income flowing through it. One is Vatable and one is Exempt. The total of both income exceeds the limit but the Vatable part will always be below it.

Does the company still need to register for VAT?

 

Thanks guys.

Replies (17)

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By Paul Crowley
26th Jun 2020 21:43

When to register. You must register for VAT if your VAT taxable turnover goes over £85,000 (the 'threshold'), or you know that it will. Your VAT taxable turnover is the total of everything sold that is not VAT exempt.

VAT registration: When to register - GOV.UK

And not outside scope I would deduce, my dear Watson

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By SXGuy
27th Jun 2020 07:46

When you say exempt. Do you mean out of scope or zero rated? Big difference.

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Replying to SXGuy:
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By Paul Crowley
27th Jun 2020 08:52

Zero rated, outside scope, and exempt are all different.
Eg Food, exports to USA, rent on domestic property

OP is an accountant in practice per prior Questions

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Replying to Paul Crowley:
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By SXGuy
27th Jun 2020 12:07

Thanks. I understand the difference. I was making sure the op does also. As you know. It would change the answer given.

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Replying to SXGuy:
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By Paul Crowley
27th Jun 2020 13:33

Careful, we all need to be on best behaviour now.

My answer was a 1 minute cut and paste from Gov website so answer does not change, only understanding of the answer.

Whoops, now I'm for it as well

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Replying to Paul Crowley:
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By SXGuy
27th Jun 2020 14:41

I think we've both been quite nice in our response. Didn't mean to offend.

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Replying to SXGuy:
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By Paul Crowley
27th Jun 2020 15:46

I thought so as well, so apologies to all concerned.

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Replying to SXGuy:
RLI
By lionofludesch
27th Jun 2020 10:49

Can't over-emphasise the importance of this.

"Exempt" is commonly misused. Even by accountants.

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By khalm0
27th Jun 2020 14:09

Defo exempt. Exempt income is rental income for vulnerable / disabled housing needs paid by local council.

Client has an existing company with little online retail trade so my thinking was that it is pointless setting up a new limited company for the housing business - May aswell run them through the same company as long as it doesn’t affect the retail side and they become liable to VAT.

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Replying to khalm0:
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By Paul Crowley
27th Jun 2020 16:13

Does company own the building?
Will building go up in value?
Will there be a gain on building?
What is exit plan?

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By fawltybasil2575
27th Jun 2020 14:33

@ Paul C.

Whilst, from the OP's question, almost certainly not relevant to the client at issue, I note your comment (your post at 9.43 yesterday) that one has to register for VAT if:-

"you know that it will" (ie know that the taxable turnover "will" go over the registration threshold).

Perhaps you would kindly expand upon your words please, since (taken at face value without amplification) they appear incorrect.

Basil.

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Replying to fawltybasil2575:
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By Paul Crowley
27th Jun 2020 15:31

Not my words Cut and paste
More here:

When to register
You must register for VAT if your VAT taxable turnover goes over £85,000 (the ‘threshold’), or you know that it will. Your VAT taxable turnover is the total of everything sold that is not VAT exempt.

You can also register voluntarily.

Compulsory registration
You must register for VAT if:

you expect your VAT taxable turnover to be more than £85,000 in the next 30-day period
your business had a VAT taxable turnover of more than £85,000 over the last 12 months
You might also need to register in some other cases, depending on the kinds of goods or services you sell and where you sell them.

If you’ll exceed the VAT threshold in the next 30-day period
You must register if you realise that your total VAT taxable turnover is going to be more than £85,000 in the next 30-day period.

You have to register by the end of that 30-day period. Your effective date of registration is the date you realised, not the date your turnover went over the threshold.

Example
On 1 May, you realise that your VAT taxable turnover in the next 30-day period will take you over the threshold. You must register by 30 May. Your effective date of registration is 1 May.

If you exceeded the VAT threshold in the past 12 months
You must register if, by the end of any month, your total VAT taxable turnover for the last 12 months was over £85,000.

You have to register within 30 days of the end of the month when you went over the threshold. Your effective date of registration is the first day of the

Kept short as question was about "exempt" IE is exempt included

And replying to an accountant with clients

Military communication 1ABC
1 Subject ( not 2 subjects for example how does VAT operate )
A accurate
B BRIEF
C clear

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Replying to Paul Crowley:
Psycho
By Wilson Philips
27th Jun 2020 15:27

Basil doesn’t do B

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Replying to Wilson Philips:
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By Paul Crowley
27th Jun 2020 15:41

But they are worth the read
My long ones end up as a ramble or rant

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By fawltybasil2575
27th Jun 2020 16:14

@ Paul C (your 15.31 post).

Thank you. You were of course entirely correct, in your quoting an extract from the GOV.UK guidance, in your 9.43 post, as I have confirmed from accessing that guidance.

Frankly, the extract is, taken in isolation, SIMPLY INCORRECT, since it implies that whenever one believes that, within the next 30 days, one’s taxable turnover will have exceeded the registration limit, then one must register.

The NEXT section of the HMRC guidance states the CORRECT position, namely that where one believes that the FUTURE taxable turnover (in the next 30 DAYS ALONE) will exceed the ANNUAL registration limit, then one must register (tantamount to an expectation that the future taxable turnover will be about 12 TIMES the compulsory registration level - this is an anti-avoidance measure, partly to prevent new businesses with taxable turnover of around £1,020,000 p.a. avoiding VAT for its first month’s trading; but also partly to catch businesses which will have massive “one-off” transactions in the next 30 days).

Basil.
PS. Apologies to Wilson for any perception of prolongation :)

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Replying to fawltybasil2575:
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By Paul Crowley
27th Jun 2020 18:18

No sure that I fully agree.( on Para 2 only )
Original cut and paste gave no time limit just
' or you know that it will.' Vague to the point of pointlessness
Even worse is the word sold. What on Earth does that mean?
It is from Gov, but I would have said supplied

Agree all others.

Still rent as an example of exempt was a bit spooky

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By Gone Sailing
28th Jun 2020 17:30

The threshold is one thing with a 'mixed portfolio' of VAT categories, but the partial exemption return is something else.

It's 3 years since my last one and I still have nightmares.

A case for 2 separate businesses then?

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